iQuanti: If you've accumulated credit card debt and are being charged high interest rates, then perhaps you should consider a balance transfer credit card. This post will explain what is a balance transfer credit card and walk you through their dos and don'ts.

What is a Balance Transfer Credit Card?

A balance transfer credit card is a special type of credit card that offers a low or zero percent APR period for a certain amount of time. This could last anywhere from 6 to 18 months depending on the offer from the issuer. Credit card companies use balance transfers as a way to entice customers to stop using their old cards and use their products instead.

How Do Balance Transfer Credit Cards Work?

A balance transfer occurs when the user elects to move the amount they owe from their current credit card onto the new one. Transfers can typically be done online by entering your current card's information into the dashboard and initiating the process. Once completed, your payment obligations will be to the new card. 

Dos and Don'ts for Balance Transfer Credit Cards

If you're thinking about making a balance transfer, here are seven great tips for making it a success.

1. Do make your payments on time

Even with the reduced interest rate, your balance transfer card will still require a minimum monthly payment. Make this payment every time or it could risk voiding the low-interest period.

2. Do make sure you can pay off the balance in time

The low-interest period is limited and won't last forever. Therefore, use this time to pay off the balance before it ends. If you don't, you'll be right back to paying higher interest rates all over again.

3. Do compare offers

Not all balance transfer rates and terms are the same. For instance, most charge an upfront fee that is usually 3 to 5 percent of the entire balance. Depending on how much money you plan to transfer, this fee could be hundreds of dollars. Take this into consideration before making your decision. 

4. Don't start spending again

After moving a balance from one card to another, don't start spending on the old card just because you can. It's habits like this that can get you in debt in the first place. Instead, practice some restraint and divert your savings towards paying off your balance transfer.

5. Don't close your old cards

At the same time, don't be tempted to close your old credit cards since you will no longer be using them. Approximately 15 percent of your FICO Score can be based on how long your accounts have been active. In addition, keeping your cards open might improve something called your credit utilization ratio which can account for another 30 percent of your FICO Score. A possible exception to this would be if your old cards have annual fees.

6. Don't apply for too many cards

If the balance you wish to transfer is greater than what is being offered, don't be tempted to apply for more than one balance transfer card. Each application can possibly result in a hard inquiry against your credit report, and too many might count negatively against your FICO Score.

7. Don't continue this cycle forever

Remember why you had to get a balance transfer in the first place. You want to use this as an opportunity to pay down your debts and get a clean slate. You can't fix the past, but you can certainly change your habits now to not fall into the same cycle in the future.